Government confirms plan to dilute ECO scheme

The government has confirmed it will double the timetable for the
Energy Companies Obligation, effectively halving the impact of the
energy efficiency scheme

The government has confirmed it will double the timetable for
the Energy Companies Obligation - effectively halving the impact of the energy
efficiency scheme - as part of a drive to cut the cost of fuel bills for
consumers.

The announcement this morning, which came as part of a package
measures aimed at cutting energy bills by an average of £50 per year per
household, also includes £540m in new investment in energy efficiency.

The move sees the ECO scheme, which targets low income
households in need of insulation and is paid for through a levy on energy
bills, extended to run over four years instead of two, with the scheme extended
through to March 2017.

This means energy companies will have four years to deliver the
expected level of insulation work through the programme, rather than two,
meaning there will be less investment in the short term.

DECC also confirmed that the government would reduce the Carbon
Emissions Reduction Obligation element of ECO by 33% for the period to 2015,
and set a target for the period to 2017 reflecting this same level of activity.

The Association for the Conservation of Energy has warned that
diluting the amount of activity required through ECO for energy companies to
meet their targets in this way would lead to 13,000 job losses across the insulation
industry.

In other measures, the government said it would introduce
incentives for people to improve the energy efficiency of their home, with a
discount of up to £1000 - equivalent to half the average stamp duty on a home -
for new home buyers to spend on energy efficiency improvements, with up to
£4000 available for more expensive measures.

The Department of Energy and Climate Change (DECC) said the
scheme would be available to all people moving house including those who don’t
pay stamp duty, helping around 60,000 homes a year, over three years.

DECC said the Government would also introduce a scheme to
support private landlords in improving the energy efficiency of their
properties, which will improve around 15,000 of the least energy efficient
rental properties each year for three years.

DECC said taken together, the homebuyers and private rental
schemes would be worth £450m over three years.

The department added that a further £90m would be spent over
three years improving the energy efficiency of schools, hospitals and other
public sector buildings.

The government will also increase the funds available to local
authorities this year through Green Deal Communities from £20m million to £80m
million, to help support “street-by-street programmes for hard-to-treat homes
in a cost-effective way”.

DECC said levies providing support for existing low carbon
energy projects will not change, such as the Renewables Obligation (RO),
Contracts for Difference (CfDs) and feed in tariffs (FITs).

Energy and Climate Change Secretary Edward Davey said: “Energy
bills are a big concern for many people, which is why we’ve been working to
reform the energy market, increase competition and make it easier for people to
shop around and switch supplier.

“Today’s announcement confirms a serious, workable package which
would save households around £50 on average.

“Today’s package also ensures that energy companies are not off
the hook. They will keep up their efforts to help people in fuel poverty cut
their bills by making sure their homes leak less heat, and they will have to be
more transparent about what they’re spending on social and environmental
measures.

“Next year, our competition test will forensically examine what
more we can do to get prices down through ferocious competition.”

The UK Green Building Council (UKGBC) said the changes to ECO
meant the number of solid wall insulation installations energy suppliers are
required to make under ECO will also be reduced to 100,000 over the new four
year period (25,000 per year).

Paul King, UKGBC chief executive said: “Make no mistake, this is
bad news for people who cannot afford to heat their homes, especially if they
live in solid walled properties, and bad news for thousands of construction
industry workers who may well be joining the dole queue this Christmas.

“It remains perverse that the prime minister is attempting to
reduce energy bills by slashing the very scheme that is designed to bring them
down for good.

“We have to recognise that some in the coalition have fought
hard for a package of incentives to sweeten the pill.

“Encouraging households to take up energy efficiency measures
when moving into a property through a ‘Stamp Duty rebate’ is something we have
repeatedly called for.”